Peru Industries began operations on January 1, 2020. During the next two years, the company completed a number of transactions involving credit sales, accounts receivable collections, and bad debts (assume a perpetual inventory system). These transactions are summarized as follows: 2020 Sold merchandise on credit for $2,280,000, terms n/30 (COGS = $1,258,000). Wrote off uncollectible accounts receivable in the amount of $34,600. Received cash of $1,354,000 in payment of outstanding accounts receivable. In adjusting the accounts on December 31, concluded that 1.5% of the outstanding accounts receivable would become uncollectible. 2021 Sold merchandise on credit for $2,982,000, terms n/30 (COGS = $1,619,000). Wrote off uncollectible accounts receivable in the amount of $53,900. Received cash of $2,246,000 in payment of outstanding accounts receivable. In adjusting the accounts on December 31, concluded that 1.5% of the outstanding accounts receivable would become uncollectible. The company uses the allowance method to account for uncollectible. Question: For year 2021 1a). Record the sales 1b). Record cost of sales 2. Record written off uncollectible accounts 3. Record collections from credit customers 4. Record the estimate for uncollectible accounts
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Peru Industries began operations on January 1, 2020. During the next two years, the company completed a number of transactions involving credit sales,
2020
- Sold merchandise on credit for $2,280,000, terms n/30 (COGS = $1,258,000).
- Wrote off uncollectible accounts receivable in the amount of $34,600.
- Received cash of $1,354,000 in payment of outstanding accounts receivable.
- In adjusting the accounts on December 31, concluded that 1.5% of the outstanding accounts receivable would become uncollectible.
2021
- Sold merchandise on credit for $2,982,000, terms n/30 (COGS = $1,619,000).
- Wrote off uncollectible accounts receivable in the amount of $53,900.
- Received cash of $2,246,000 in payment of outstanding accounts receivable.
- In adjusting the accounts on December 31, concluded that 1.5% of the outstanding accounts receivable would become uncollectible.
The company uses the allowance method to account for uncollectible.
Question: For year 2021
1a). Record the sales
1b). Record cost of sales
2. Record written off uncollectible accounts
3. Record collections from credit customers
4. Record the estimate for uncollectible accounts
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